Indemnification/Waiver form

We are a Discretionary RIA firm and have a large client requesting the ability to conduct his own trades from time to time. (wants control over their accounts)

Has anyone had this challenge and if so, what waiver/indemnification if any did you have them sign?

Thank you in advance.
Jacqueline

Comments

  • We have a clause in our investment management agreement that allows for a client to have what we call a courtesy account it is a separate account from money that we manage that way there's no confusion as to who's doing what.



  • We tried that Cathy, they are not interested in that unfortunately.

    Thank you for your suggestion it is greatly apprecaited.

    Jacqueline Parker
    Operations Manager


    Arista Wealth Management
    10091 Park Run Drive #200 | Las Vegas, NV 89145
    O: 702-309-9970 | T: 877-309-9970 | F: 702-974-0710
    Nevada | Arizona | Utah |
    www.aristawealth.com

  • We have a letter that the client signs stating that the position is “client directed” and that we did not make the decision to purchase, we will still vote proxies, safekeeping, collection of income, etc. there is no indemnification clause per se but there is language in the letter stating “I accept full responsibility and release you from any responsibility for inclusion in the account.” Client signs letter and the letter spells out exactly our responsibility with respect to the position and whether the position will be included in market value for fee purposes.


    Lauri London
    Chief Compliance Officer and Associate General Counsel
    Boston Private Wealth LLC
    11376 North Jog Rd Suite 101
    Palm Beach Gardens, FL 33418
    561-630-4600 Office
    561-273-1359 Direct
    561-630-9788 Facsimile
    llondon@bostonprivatewm.com
    www.bostonprivatewm.com

  • We have clients that keep a certain amount in unsupervised cash (cash that we will not invest) to use for client directed trades or notify us of client directed trades to be coded within their account as unsupervised positions. All unsupervised assets (including cash) is not figured into our firm's performance on the account and we do not bill on the assets. Our Investment Advisory Contract indicates how these type of client directed trades will be treated by the firm, basically saying that we will continue to vote proxies, but otherwise they are considered “excluded” from our discretionary authority in “The Account” as referenced in the IAA.


  • We have a non-discretionary program for client trades. The Rep is expected to make recommendations (ongoing and continuous advice), but the client is also allowed to make their own trades and, of course, must approve any Rep recommendations. Trades are marked as either solicited or unsolicited.

    We also allow two types of positions to be held in an advisory account (full discretion or non) where we identify them as either Unsupervised or Excluded. Unsupervised is not billable and is not included in the performance reports for the account. Excluded is not billable, but is still included in performance.

    Thank you,
    John

    (205) 414-3367 • (205) 601-5278 cell

  • Provide the client with written notice of the terms and conditions for allowing it to conduct self-directed trading, i.e., advisor shall not be liable for any investment decisions made or not made in connection with the trades, advisor disclaims any liability for suitability or appropriateness of the trading activity or maintaining or liquidating the positions, all investment decisions made or not made in connection with the trades are solely those of the client and not the advisor, etc. At least you’re on record.

    Craig M. Hughes, J.D.
    Chief Compliance Officer
    chughes@fundmastery.com

    BROUWER & JANACHOWSKI
    Wealth Management and Financial Advice

    1831 Tiburon Boulevard
    Tiburon, CA 94920
    415.435.8330 415.435.8526 FAX
    www.fundmastery.com
    _________________________________________________________
  • Ms. London, Are you able to send a draft of the letter that you use? We would be interested in seeing the exact language. Thank you for your input.

    Louie DeTemple
    Osborn Williams & Donohoe
    513-621-2875

  • Ms. London,

    Thank you for the response.

    Would you be available to further discuss or share a draft of this letter by chance? I am in need of the language as well.

    Thank you in advance.

    Jacqueline Parker
    Operations Manager


    Arista Wealth Management
    10091 Park Run Drive #200 | Las Vegas, NV 89145
    O: 702-309-9970 | T: 877-309-9970 | F: 702-974-0710
    Nevada | Arizona | Utah |
    www.aristawealth.com


    >
  • Hi Jacqueline,

    At two of my former employers, both prominent national Trust and Investment Management firms, permitting a client to direct trading activity in an account managed under a management agreement or trust was prohibited.

    While a client would be permitted to retain an asset that had been deposited, with the appropriate documentation as referenced by Lauri, this would not have applied to active trading.

    Allowing a client to trade in an otherwise managed account creates a host of regulatory issues, especially considering the regulatory community’s reorientation toward fiduciary duty. You may be creating a situation where you’ll have to defend against criticism that you failed to protect the client from themselves. Additionally, client trading would skew account performance data, on which I’m sure you are being evaluated. Of course, these problems are only amplified if the account(s) in question is governed under a Trust.

    As Cathy S. suggested, establishing a “courtesy account” in which the client could direct trades, separate from any managed accounts, is the best route to go.

    Matthew


    Matthew E. Abrams, CRCP
    FINRA Certified Regulatory & Compliance Professional
    Vice President — Relationship Management

    875 Avenue of the Americas, 12th Floor
    New York, New York 10001
    MAbrams@complysci.com
    646-787-9335 (Direct)
    212-327-1533
    646-583-7971 (fax)
    516-819-3819 (mobile)
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